Interim
Joint Committee on Appropriations and Revenue

Budget
Review Subcommittee on General Government,
Finance, and Public Protection

Minutes
of the<MeetNo1>1st Meeting

of
the 2012 Interim

<MeetMDY1>November 29, 2012

Call to Order and Roll Call

The<MeetNo2>first meeting of the Budget Review
Subcommittee on General Government, Finance, and Public Protection of the
Interim Joint Committee on Appropriations and Revenue was held on<Day>Thursday,<MeetMDY2>November
29, 2012, at<MeetTime>10:00 AM, in<Room>Room 129 of the Capitol Annex. Senator Jack
Westwood, Chair, called the meeting to order, and the secretary called the roll.

Adam Edelen, Auditor of Public Accounts, provided an
overview of the report on special districts in Kentucky. He said there is an
opportunity to make Kentucky a national leader in good government with a
four-point approach, which includes modernization and reform of 1,017
individual statutes in order to develop clarity; a better system of compelling
compliance; a centralized registry of special districts that tax, fee, hold
money in reserves, or borrow funds, including organizational structures; and, a
method of accountability and transparency such as the ethics code.

In response to questions from Representative McKee, Auditor
Edelen said under existing law there are 23 categories of taxing districts and
20 categories of non-taxing special districts which charge fees. He added that
there is a citizen auditor database available on the internet which can be
accessed for information regarding individual counties.

In response to a question from Chair Westwood, Auditor
Edelen stated that there are some special districts that neither tax nor charge
fees, such as local health departments and area development districts.

In response to a question from Co-Chair Adams, Auditor
Edelen said expectations and responsibilities of special districts need to be
identified and clearly outlined for newly formed special districts as well as
current ones. He also said the laws are unclear regarding the dissolution of
special districts that do not exist or are operating illegally.

In response to questions from Representative Koenig, Auditor
Edelen said the disparity of approximately $1 billion accounts for federal,
state, and local grants, and corporate grants, which become a part of their
revenue stream. He also said when the website was launched, numbers were
scrambled in one area due to a computer glitch, and that issue has been
resolved. He added that the cost of a centralized registry would be
approximately $250,000 per year and should be housed at the Department of Local
Government, with the cost being covered by a staggered fee system and paid for
by the special districts.

In response to questions from Representative Stone, Auditor
Edelen said the current threshold for annual audits is $750,000, and those
districts with less revenue are audited every four years, by law. He added that
only 45 percent of those districts with revenues over $750,000 get annual
audits, and of those who fall below that threshold, one in three does not get
audited every four years.

In response to questions from Representative Pullin, Auditor
Edelen said some boards are comprised of elected officials, which allows for
more accountability in those special districts. He added that nonprofits report
to the Secretary of State, not the special district. He reiterated the need to
reform the oversight of the system.

In response to questions from Chair Westwood, Auditor Edelen
said there are many special districts in northern Kentucky. He went on to say
that if the special districts’ ability to change their power to tax to the
fiscal courts would be disastrous for the county governments’ ability to bond. Audits
are conducted by APA career staff as well as private CPA firms under contract,
and are paid for by the special districts.

Representative Denham said there are four members of this
committee who are leaving the General Assembly, and he made a motion for a
resolution to thank Co-Chairs Westwood and Adams and Senators McGaha and
Pendleton for their contributions to this committee and their service to the
commonwealth; the motion was seconded by Representative Combs and passed
without objection.

Co-Chair Adams stated that he had been on the committee for
over 15 years and thanked everyone for the opportunity to serve in this
capacity. Co-Chair Westwood echoed those sentiments and thanked everyone for
their support.

There being no further business before the committee, Chair
Westwood asked for a motion to adjourn. A motion was made by Representative McKee
and seconded by Representative Stone, and the meeting was adjourned at 11:18
AM.